PrintFebruary 5, 2010
Taxpayers Deserve an Annual Report to the Shareholders
Last week Democrats voted to raise the federal debt ceiling a staggering 1.9 trillion dollars, the second increase in the federal debt limit in two months. The United States debt is now 14.3 trillion dollars, or roughly $45,000 per American citizen. With President Obama submitting a budget that puts the nation 1.6 trillion dollars further in debt, it is time for conservatives to become engaged over how to slow our exploding deficit and help entrench fiscal responsibility within our governing system. Americans should receive an annual report to the shareholders from the federal government explaining how the taxes we pay are spent.
Too often we think of the U.S. government only as the referee of financial institutions. However, the federal government is also the largest single financial entity in the world. Abraham Lincoln aptly stated in the Gettysburg Address that our government is "of the people, by the people, for the people." Through their tax dollars, Americans are stakeholders in this financial institution and are held liable for its financial risk. Our ownership should grant us more direct information about how the government does its business and how our investments are paying off.
On an annual basis, the Tax Foundation in Washington, D.C. calculates what it calls Tax Freedom Day, the first day of the year that American workers have theoretically earned enough income to fund its annual tax burden. That tax burden, which worked to pay off until April 13 last year, is the investment of our personal wealth in the operation and services provided by the United States government. Regardless of whether the federal government obtains its money through foreign loans or taxes, Americans will eventually be the ones to pay the price of Congress's deficit spending. Slowly, Tax Freedom Day will most certainly be pushed farther down the calendar.
In the business world, the SEC requires publicly owned companies to disclose their financial data to their shareholders. Companies send a report directly to each stockholder on a yearly basis, regardless of how much equity in the company each person owns. CEOs must explain how and why they are spending their shareholders' money. They also have to explain the bottom line, as well as the future outlook of the company's finances. The federal government should be held to similar standards.
Our government should be required to send its own version of a stockholder's report to everyone who pays taxes. If the people of the United States could see how their money is spent, politicians -- like board members of a company reporting to their shareholders -- might be less willing to pass legislation that spends our money with reckless abandon. If American taxpayers could see on an individual basis how their money is spent, they would be more vigilant in keeping congressional spending in line.
The United States Government Accountability Office already creates a financial statement for the federal government. Every year, government watchdogs break down where our tax money goes. However, just like the quote that says one death is a tragedy while a million is a statistic, hearing politicians talk about a trillion-dollar budget can be understood only in the abstract by most taxpayers. If Americans could see how their personal contributions to the treasury were spent, they would be more likely to demand more fiscal responsibility from our elected leaders.
The report would be very simple to make. Included on our tax returns should be a simple breakdown of how our taxes were spent. According to the Center on Budget and Policy Priorities, the federal spending from 2009 was divided into the following: 21% on defense; 21% on Social Security; 20% on Medicare, Medicaid, and CHIP; 11% on "safety net" programs; and 8 % on interest on our debt, with another fifth of our spending allocated to medical research, services for our veterans, education, and other projects. The IRS could easily provide a receipt that records how much of our taxes contributed to federal spending as well as give us a brief overview of future government liabilities, such as the upcoming cost of Social Security and Medicare, per taxpayer.
The median household income in the United States according the United States Census Bureau was $50,303 in 2008. According to the IRS tax calculator, a family of four pays roughly $4,500 in federal taxes. How would most American families react to the knowledge that they pay around $360 just on interest for the federal debt? Would Americans be glad that they pay about $950 for defense and social security?
Americans want fiscal responsibility. Democrats will find it difficult to oppose this small step towards a more open government. Remember, Moveon.org worried about President Bush's trillion-dollar deficit long before President Obama's massive spending caught the attention of much of the public.
Alone, this modest change in how our government reports its financial standing will not put us back onto the path of fiscal responsibility, but it is a start. Thomas Jefferson once wrote, "Whenever the people are well-informed, they can be trusted with their own government ... whenever things get so far wrong as to attract their notice, they may be relied on to set them to rights." The best way to ensure that our elected officials stop spending money like it has no real consequences is to specifically show where our tax money is spent and make every taxpayer a watchdog of the federal deficit.
Carl Paulus is a Ph.D. candidate in history at Rice University and studies nineteenth-century politics.
